News of promoter fights spook investors considerably. How worried should minority investors be as they are just caught in the cross-fire?
Globally, aviation is a very difficult industry to make money and to run. Hardly have aviation companies really created wealth for the investors. Many people thought IndiGo was an exception in generating investor wealth and being profitable.
Let us hope that IndiGo is not throwing away the advantage that it built up over the last 10 years and especially since Jet Airways is folding up and the entire market share is up for grabs. But at that opportune time, it is quite disturbing that promoters instead of focussing on making IndiGo stronger, are indulging in creative differences. This is a matter of great concern for the company as well as the industry. Let us hope that sanity prevails.
Both the promoters should be able to come to a conclusion quite soon because time is very precious and in each passing day, they are missing an opportunity to grab market share. IndiGo will remain the market leader. Even for the country’s economy, we are in need of low-cost airline with a strong market share. IndiGo has all the makings and let us hope they do not throw away the opportunity when opportunity was knocking on their doors.
What is your initial reaction on the merger of the consumer division of Tata Chemicals with Tata Glabal? The Tatas have not historically been very successful when it comes to consumer staples businesses.
Markets are extremely happy that under the leadership of Mr Chandrasekaran, finally the senior management is looking at even the smaller parts of the Tata Group. Traditionally, all the major focus and major energies have been diverted towards TCS and Tata Steel and Tata Motors, because understandably they are large companies.
Many of the smaller companies of the Tata Group always received only that much attention. Markets are happy that finally a shareholder-friendly move has been done to ensure the value unlocking and to align the interest and to set the business model in such a fashion that all the consumer-related things will come under one umbrella.
It is a matter of great comfort for the investors that the management has started thinking about them. This is one of the reasons both the stocks have done phenomenally well post that announcement. And, of course, EPS is a function of financials. We will see how things pan out once the merger is done. Over the next one-two years, we will know but to start with, it is a great move by the Tatas. Let us hope that the shareholder friendliness that they exhibited will sustain even into the other parts of the Tata Group companies.
How perturbed should investors be with respect to what is happening in pharma and the kind of fall we have seen in the week gone by?
It is quite disturbing. For the last one to two years, pharma was ranked as an underperformer and some investors were hoping for a contrarian trade. There may be a chance of some uptick in the beaten down pharma companies. But the developing news on the US lawsuit is adding fuel to the fire on the downside. It will probably take a lot more time for the pharma companies to make a comeback.
Many of them have beaten down very badly from their all-time highs or even 52-week highs. But unfortunately, the entire investor and fund managing community today is betting more on banks and other industries. Pharma is probably the lowest in terms of the focus at this moment.
This will continue for some more time. The best era of pharma was a decade earlier, more or less. From here, it is at best a contrarian trade, just that the bad news flow is not stopping.
For those investors with a longer-term horizon, what is looking attractive in this market?
Most of the political discussions should be over next week. Let us not give too much weightage to it. After that, again the discussion will get back into economy earnings, employment, monsoon and so on. That is where the major worry is because the earning season that is building up is not at all a great one.
There were lots more disappointments than success stories. Once the election narrative is done, there is a very good chance that the market may cool off, giving extra opportunity for investors to accumulate good quality names.
On the financial side, we are comfortable with RBL Bank and HDFC Life and we are also positive on ITC and Nestle. Even on consumption, there are major challenges in terms of a slowdown but Nestle and ITC both have given good results and being market leaders, we believe they can weather through the current slowdown of the consumption.
We have also added KEC International, one of the midcap companies. These are some of the names which in case of market correction, one can gradually accumulate for the longer term point of view.